Will the health bill increase private activity in the NHS?

The health secretary Andrew Lansley today rejected the fears of the health professions that his reforms will increase the number of private patients treated in NHS facilities, claiming that in fact it would protect the NHS. Is that right?
Polly Curtis, with your help, finds out. Get in touch below the line, email your views to
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Andrew Lansley today addressed that critique head-on, claiming that "technically" at the moment a trust can have any income from private work and that the bill prioritises NHS patients in law for the first time. Asked about plans to introduce a 49% limit on private income for trusts, he said (audio):

Gavin Rodgers/Rex Features

Many of our listeners they will think this and on the face of it it looks as though it's about increasingly private activity in NHS, which tt isn't at all. NHS trusts, of which there are 120, technically can have any private income and that's been true for years. The amendment was actually about making absolutely clear that the responsibility of any NHS organisation in the future was to provide NHS services. That that's their purpose, they can't compromise on that. If they have private activity it might supplement their income but it must not be at the expense of their responsibilities to deliver services for the NHS and to deliver for NHS patients.

Analysis

(1) An authorisation may restrict the provision, for purposes other than those of the health service in England, of goods and services by an NHS foundation trust.

(2) The power must be exercised, in particular, with a view to securing that the proportion of the total income of an NHS foundation trust which was an NHS trust in any financial year derived from private charges is not greater than the proportion of the total income of the NHS trust derived from such charges in the base financial year.

(3) "Base financial year" means the first financial year throughout which the body corporate was an NHS trust or, if it was an NHS trust throughout the financial year ending with 31st March 2003, that year.

Howard Catton, head policy at the RCN, has just told me that this meant for the vast majority of hospitals a cap of 2%. But for some specialist units such as Great Ormond Street for children or the Royal Marsden cancer hospital which could supplement their income by doing very specialist private work, it might have been up to 10%. He said:

Our understanding is that there has been a range of limits that different hospitals can have in terms of private incomes. That's been between 2% and 10%. Ormond street and others have argued for a higher cap so they can reinvest that money. Those with a higher limit are usually world leaders. In the white paper the government was minded to remove that cap completely. We said no, we wouldn't agree with complete removal of that. Just before Christmas through the lords, the wording was you could increase private income so long as it isn't more than NHS income – so 49%.

We are concerned. We're worried that in financial difficult times hospitals will max out on private income and NHS patients will be pushed to the back of the queue. NHS patients may also feel a subtle pressure to reach for the credit card.

In fact the current bill (pdf), in section 164, had proposed removing the restrictions in section 44 of the 2006 Act. It said:

"(2A) An NHS foundation trust does not fulfil its principal purpose unless, in each financial year, its total income from the provision of goods and services for the purposes of the health service in England is greater than its total income from the provision of goods and services for any other purposes."

Lansley's claim that hospitals could "technically" charge what they like is technically right because section 44 of the 2006 Act does only say that the authorities "may" restrict hospital's private income the level of 2003, not that they have to. But in practice they did restrict private incomes and hospitals kept to a cap ranging from 2-10%, meaning a new 49% cap will undoubtedly allow hospitals to increase their income.

Lansley also stressed in his interview today that the health bill would for the first time prioritise NHS patients over others. He said: "The amendment was actually about making absolutely clear that the responsibility of any NHS organisation in the future was to provide NHS services."

However, these protections were actually in a separate amendment, introduced after the 49% cap was tabled. That amendment, tabled on December 14 by Lord Phillips of Sudbury, Baroness Finlay of Llandaff, Lord Kakkar and Lord Darzi of Denham, said:

299B Page 159, line 33, at end insert—

"( ) An NHS Foundation Trust may provide private health treatment and care but not so that its provision is to any significant extent detrimental to that provided for the purposes of the health service save that that shall not restrict accommodation and services not available within the health service nor restrict treatment or care where that is not a clinical priority."

299C Page 159, line 35, at end insert—"( ) NHS services must not use NHS business to recruit private patient business.

It's also not entirely right to claim that such protections did not exist before. The 2006 Act already said in section 43 preceding the element that capped private earnings:

43 Authorised services

(1) An authorisation must authorise the NHS foundation trust to provide goods and services for purposes related to the provision of health care.

(2) But the authorisation must secure that the principal purpose of the NHS foundation trust is the provision of goods and services for the purposes of the health service in England.

So the claim that there had not previously been protection of the NHS's core purpose is also undermined by the existence of previous legislation on this, although the new health bill would introduce new protections to prevent NHS services being used to recruit private patients.

Summary

While Lansley is technically right that trusts could have any level of private income under the previous laws, the health Act 2006 stipulated that they may be capped at the level of 2003. In practice this is what happened and the majority earned no more than 2% from private work with some specialist trusts earning more to subsidise NHS work. The 49% cap will undoubtedly allow this to increase and the professionals warn that with public funds restricted they could be tempted to prioritise private work. Lansley claimed the principle purpose of the amendment was in fact to protect NHS work, but this is contained in a separate amendment to the 49% cap and the idea the principle purpose of NHS trusts was to provide a national health service for England was already enshrined in law.

2.07pm: Below the line, @richardblogger has come up with some new information which changes my analysis. He claims that Lansley is being disingenuous:

NHS trusts, of which there are 120, technically can have any private income and that's been true for years. Lansley is correct, an NHS trust can have any private income. However, NHS TRusts are the "old" version, since 2006 the "new" version are Foundation Trusts. Lansley is not talking about FTs.

Foundation Trusts are limited by the Private patient Income (PPI) cap as specified by the 2006 Act. NHS Trusts are being abolished by the Health and Social Care Bill and so all NHS Trusts have to be FTs by April 2014 (fat chance, many of the remaining NHS Trusts have serious finance issues that means they cannot become FTs without lowering the authorisation criteria).

When a NHS Trust is authorised as a FT it is given a series of authorisation criteria, one of which is its PPI cap (set at the %age of private income in 2003). If an FT exceeds this level it is in breach of authorisation and is warned by Monitor to make changes. NHS Trusts who want to achieve FT status have to make sure that they do not exceed their 2003 level of income. For example, a few years back, Great Ormond Street Hospital found that they exceeded their 2003 level considerably, and as a consequence they created a charity to absorb some of this private income.

The latest data from Monitor is that in 2010/11 FTs generated £252m income from private patients, from a total income of £26,867m (ie 1.1% up from 1.0% in 2009/10). There are a few FTs with higher caps: 5 have PPI caps over 5%:

@richardblogger has shown that Lansley's claim that trusts can have any income they like is true but irrelevant because he is forcing all trusts to become foundation trusts, which are currently subject to the 2006 cap on private income, and which he is scrapping and replacing with the new 49% cap.

The evidence he has provided on incomes from private work show that the scale is broader than some thought, but that overall for foundation trusts it is tiny, just 1.1% last year.

The Guardian's social affairs editor Randeep Ramesh has also alerted me to this story about the NHS's private income. He writes:

Gauri Gill/Guardian

NHS revenues from private patients have stalled over the last year, according to Laing and Buisson. However, it predicted the introduction of the Health and Social Care Bill, currently proceeding through Parliament, would encourage further private treatment in NHS hospitals. The market analyst blamed recessionary pressures and the private patient cap for causing the 2% fall in private income to £430m in 2009/10 from £439m the previous year.